Next few weeks critical to defining DoD in second Obama term

Jared Serbu, DoD reporter, Federal News Radio

In some ways, a second Obama term is likely to mean some degree of continuity in
the Defense Department. But the shape and size of the government's largest and
most complex department over the next few years will depend to a large degree on
what happens over the next few weeks.

The presidential election, whatever its outcome, was bound to have some impact on
the resources DoD would have available over the next several years. Former
Massachusetts Gov. Mitt Romney had promised to
increase Defense spending to 4 percent of the nation's gross domestic product.
President Obama had sketched out
his plan for the next 10 years of Pentagon spending several months earlier,
including $487 billion in reductions to previously-planned defense spending in
compliance with the debt ceiling agreement the White House and GOP lawmakers
struck in the summer of 2011.

But as part of that same agreement, another half trillion dollars' worth of cuts
will hit DoD beginning Jan. 2 unless the president and lawmakers arrive at a deal
to undo sequestration.

"There are a lot of question marks out there," Pentagon Press Secretary George
Little told reporters Thursday. "This is really the Congress of the United States
that needs to answer the question of when sequestration will be ended. We hope to
avert sequestration before it kicks in."

Those question marks make it hard to foresee what the impact of a second Obama
term on DoD will truly be, said Todd Harrison, the senior fellow for Defense
budget studies at the Center for Strategic and Budgetary Assessments.

George Little, press secretary, DoD

"Sequestration is really the big unknown right now. This huge fog bank really just
prevents us from seeing much beyond Jan. 2," he said.

Nonetheless, Harrison said while the sequestration debate that will happen in the
lame-duck session of Congress has little to do with Defense and more to do with
disagreements over tax policy and entitlement spending, it's unlikely that DoD
will escape the debate without further cuts beyond the $487 billion agreed to last
year.

"If anything, it's just because of history. The Defense budget has gone through
three cycles of spending since World War II, and it looks like we're coming off of
one of the peaks in those cycles," he said. "If historical trends hold true at
all, we could be looking at a 20 or 30 percent gradual reduction in spending over
the next decade. Given the fact that we have a near-record federal deficit right
now, it seems reasonable to assume that Defense is going to be part of that
deficit reduction effort."

Gradual spending cuts preferred

That gradual spending cut would be preferable, from DoD's perspective, to the
indiscriminate 10-percent, across-the-board decreases that would happen immediately next year under
sequestration. Pentagon officials have consistently maintained that the problem
with sequestration isn't just the amount of the cuts, it's the fact that the
process robs leaders of any discretion to prioritize.

Harrison thinks with the cuts on a gradual slope, the Obama administration's
defense policy in a second term will still hew closely to the strategy it rolled
out in January.

"We're going to see a lot of continuity, as one would expect when the
administration has not changed. We will have to see some tweaks to that strategy
though if the budget is reduced either from sequestration or some other deficit
reduction deal," he said. "DoD has made it pretty clear that the strategic
guidance they put forth last year was tied to the budget, and they wouldn't be
able to execute it without that budget. And I think that's true."

But Tom Donnelly, a defense and security policy analyst at the American Enterprise
Institute believes DoD has a lot more to worry about from the outcome of the lame-
duck negotiations. He predicts the big cuts contemplated under sequestration
represent a ceiling, not a floor for defense spending in a second Obama term, even
if Congress and the President negotiate a deal to alter the makeup of the cuts.

"Over the past year, we've pretty clearly seen that neither party made the defense
budget a top priority. That was essentially reflected in the Budget Control Act
and its sequestration provision," he said. "What I would really be afraid of is
that the Republican leadership in the House and the White House would work out
some sort of short-term or long-term budget deal that would essentially lock in
the defense cuts in order to minimize the sacrifices to tax revenues and
entitlements."

Even though the Pentagon's military and civilian leaders have said consistently
that their new defense strategy simply can't be executed with the funding levels
sequestration would leave them, Donnelly thinks that view is subject to change.
"I've been doing this long enough that I can see the 'risk-o-meter' being
manipulated enough to support whatever the budget is," he said.

And, Donnelly added, the defense strategy leaves enough wiggle room for DoD
leaders to make more cuts in the coming years without scrapping the defense
strategy and starting over.

"By reducing the standard of sufficiency to the 'one war' construct, to use the
shorthand term, they'll be able to say that lower standard allows further cuts to
be made," he said. "The argument will be that if all we're going to do is fight
one war at a time and not get involved in any extended counterinsurgency or
peacekeeping operations, we can stand to cut some more."

No 'political appetite' for large defense cuts

But Russell Rumbaugh, a former congressional staffer who was responsible for
defense budgets on the Senate Budget Committee said he thinks it's highly unlikely
that any political deal over deficit reduction will target DoD for abrupt or
significant reductions.

"I don't see a big political appetite for large defense cuts," said Rumbaugh, who
now directs the Stimson Center's budgeting for foreign affairs and defense
program. "Do I think large defense cuts could be done as part of a grand bargain?
Yes. But the grand bargain itself seems like a very difficult reach. The important
point to remember here is that while entitlements are part of our fiscal crisis,
they're not part of the fiscal cliff. Discretionary spending is at risk right now
because of the debt deal, but entitlements for the most part are not."

Russell Rumbaugh, senior associate, Stimson Center

But Rumbaugh said if DoD is asked to absorb cuts on the scale implicated by
sequestration, it certainly wouldn't be unprecedented for a military coming out of
a war.

"If you smoothed it out and didn't take it all in the first year, it would look an
awful lot like previous defense downturns. So it's not unreasonable to think that
it might happen. But to get that in an agreement up front would require it to be
rolled up in this grand bargain that includes entitlements and taxes," he said.
"Right now it looks like we can expect defense spending to be roughly at the
current level, but I'd expect that every year, it'll be drawn down just a little
bit more so the President and Congress can try to free up some resources. You'll
see downward pressure on defense, but not a fundamentally different level."

Aside from budget issues, another big DoD change that's speculated to happen in
the coming weeks or months involves a switch in leadership at the very top. At 74,
Defense Secretary Leon Panetta reportedly would like to return more
permanently to the northern California home from which he shuttles to Washington
each week.

At the Pentagon Thursday, spokesman George Little declined to provide further
fodder for those press accounts.

"There's always a temptation to engage in Washington parlor games after an
election," Little said. "Secretary Panetta is focused squarely on the missions of
the Department of Defense. He's not focused on his personal future."

Like much of the rest of the Obama administration's political appointees, DoD's
civilian leadership has been relatively
stable over the course of the president's first term.

But AEI's Donnelly said we should expect to see departures soon by not just the
Defense secretary but some other high-level appointees such as military service
secretaries.

"Panetta was kind of a caretaker guy anyway, and there are other people at the
deputy and undersecretary level who have been there for four years and are just
exhausted," he said.

CSBA's Harrison said whoever the new Defense secretary is, he or she will have a
lot on his or her plate.

"The next secretary really will have an opportunity to put his or her thumbprint
on the future of the department," he said. "There are a lot of major decisions
that have to be made, such as following through of this pivot to the Asia-Pacific
region. What does that really mean? What kind of new capabilities are we going to
invest in or not invest in? A lot of those decisions are going to be made in the
next couple years. The next secretary of Defense is going to have a lot of room to
influence those major decisions."